Archive - May 15, 2014

The one-way street in European peripheral bond yields/spreads... is over. Today saw Italian, Spanish, and Portuguese bond spreads smashed higher by the most in over 15 months. European stock markets all tumbled too with the FTSE-100 down over 3.5% and Portugal down 2.8%. Greece's retroactive tax idea (quickly denied) drove Greek stocks into the red for the year and slammed the new GGB issue lower. Europe's credit markets cratered wider and Europe's VIX burst back over 17.

Barclays just can't catch a break these days: after creating the biggest "bad bank" 5 years into the laughably called "recovery", the latest batch of terrible earnings and the announcement of some 19,000 pink slips to be handed out shortly as the British bank has now lost all benefits from being presented the only valuable Lehman assets on a Blue light special platter 5 years ago, it now appears that the desperate and flailing bank also has placed monkeys in charge of trading because as Bloomberg reports it was also responsible for the freakout that hit a vast number of stocks at 3:49:00 pm on Tuesday and which we profiled in "Is There Anything Wrong With These Charts?" It appears the answer was "yes."

As the Dow tumbles back into the red for 2014 and the Russell firmly into correction territory, all eyes are focused on the 'rotational support' for the S&P 500... and it appears to be faltering quickly. As BofA notes, a break below the S&P's 50-day moving average is key... and we just did. What is just as worrisome is the break of the all-supportive USDJPY one-year-trend to 2-month lows..

While the headlines are being made by David Tepper's "markets are dangerous" comments, there was plenty more bearish, bullish, and everything in between as the Skybridge Alternatives (SALT) Conference on day 1.

Just in case the message was unclear when Russia held its "massive nuclear attack" drill last week, Putin - unlike Obama who has had a problem with clarifying over the past three months just what "costs" means - intends to hammer the point ten days from today when Ukraine is set to hold its presidential elections, when the Russian military has scheduled to hold yet another military drill, "Aviadarts 2014", this time involving fighter jets (including as Su-27, Su-24, Su -25, Su-34 and MiG-29 jets and Mi-8 , Mi-24 , Mi-28, Ka-52 helicopters) and will see the participation of 71 crews of military aircraft and helicopters rehearsing the "countering of enemy air defenses, destruction of ground targets and carpet bombing enemy territory." Somehow we think Ukraine (and NATO) will get this particular message loud and clear.

From record-high exuberance to reality-soaked dysphoria in 2 short days... if you listen carefully, a million asset-gethering talking heads are screaming for a Tepper retraction...

It may have been sunny in New York, where the previously reported regional Fed print soared and smashed expectations, but it looks like Philly had a few drizzles despite the name of the infamous TV show, as the just reported Philly Fed indicated a modest decline in the local index, which dipped from 16.6 to 15.4, but just above the 14.0 consensus estimate.What is worse, all the key components, New Orders, Shipments and Unfilled Orders all declined from April.

For the 5th month in a row, homebuilder hope has missed expectations. At 45 (vs 49 expectations), this is the lowest the NAHB survey has been at since May 2013, catching down to the reality of home sales and mortgage applications. On the bright side, realtors can't help but feel thr turn is coming sometime soon - the "future" hope index rose to its highest since January as the "current" reality index drops to 12 month lows. The West region continues to tumble.

"They" said it couldn't happen.. but the Max Pain trade continues...10Y 2.4982%

30Y US Treasury yields have retraced more than 50% of the Taper Tantrum and weak data this morning once again pressures yields to new lows. 10Y now trades 2.5009%, 30Y breaks to fresh 11-month lows at 3.31% as the yield curve is flattening notably once again. European peripheral bonds are having their worst day in a year (as we noted earlier) and US and European equity markets are stumbling.

Uh-oh. While soft-survey-driven data shows sentiment rebounding after Americans hibernation, it appears the hard data on what they are actually producing - now that weather is behind us - is dismal. Industrial Production slumped by 0.6% - its biggest miss since April 2011 - after its March rebound. This drop is the lowest since June 2009... and this is after the post-weather rebound... Still wondering why bond yields are collapsing? Don't trust the signals of the bond market - stick with believing in the analysts - 80 out of 81 economists thought industrial production would have done something better in April.

Four years and three prime ministers after Greece’s then premier, George Papandreou, requested an international bailout that slammed his nation with painful austerity (but saved the EU banks), Bloomberg notes that political instability still haunts Greece. Despite issuing bonds and GDP coming in slightly better than expected (still in recession/depression), former Prime Minister Costas Simitis of Pasok admits "The euro crisis seems to be over but its causes have not withered away," and if election polls are anything to go by, the fragile fraud that is a Greek recovery is set for problems Samaras' governing coalition as Syriza (the opposition that rejected the bailout terms) support soars and Pasok plunged to sixth place with just 5.5% support. In addition, retroactive taxes on gains are weighing on European bond markets (and Greek stocks).

We went down the 'golden' rabbit hole and we were stunned by some of the things we found...

The CPI headline print of 0.3% for April came just as expected, rising from 0.2% in March and the highest sequential increase since June of 2013. It was also in line with expectations. The CPI ex-food and energy rose 0.2% and up 1.8% from a year ago, both just modestly higher than expected. Other details: "The food index rose 0.4 percent in April. The index for food at home, which rose 0.5 percent in both February and March, increased 0.4 percent in April. The index for meats, poultry, fish, and eggs rose 1.5 percent in April and has increased 3.9 percent over the last three months. The index for meats rose 2.9 percent, its largest increase since November 2003.  The rent index increased 0.3 percent, the index for owners’ equivalent rent advanced 0.2 percent, and the index for lodging away from home rose 0.4 percent. The medical care index rose 0.3 percent in April, with the indexes for medical care services and medical care commodities both increasing 0.3 percent."

"Mission Accomplished"... At 297k this is the lowest initial claims print since May 2007 (beating expectations of 318k by the most in 8 months). This rebound jump lower in claims reflects on many of the most recent indicators bouncing back from weather-effects but the question is its sustainability - and extrapolatibility (which we are sure is a word being used by the sell-side strategists expecting 4% GDP growth in Q2). Total benefits dropped 9k to 2.67 million - the lowest since Dec 2007. All things considered - America is fixed... so why are bond yields collapsing and GDP so piss-poor? Just like Japanese GDP however, good news appears to be bad news as the US equity market did not flinch on this record-setting jobs print.